The CFA Franc Zone: A Re-Evaluation
34 Pages Posted: 2 Oct 2013
Date Written: September 30, 2013
Abstract
Although the CFA monetary union is not an “optimal” currency area as such, it has allowed member countries to benefit from the convertibility guaranteed by the French Treasury and from enhanced policy credibility in achieving low inflation rates.
Both benefits may be under threat. The convertibility is under threat due to the harder budgetary commitments imposed on France by its membership of the Eurozone and the dwindling political interest in the CFA Franc Zone shown in France.
The policy credibility is becoming costlier as evidenced by output-inflation trade-offs, which, although still more favourable than in comparable sub-Saharan African countries, have been declining since the 1994 devaluation period.
Keywords: CFA Franc Zone, Africa, France, monetary unions, aid
JEL Classification: F15 , F33 , F36
Suggested Citation: Suggested Citation